maybe do some picking right into the sell-off. go bottom first. i like to say there's always a bull market somewhere. i promise to try to find it just for you right here talked about tonight. maybe do some picking right into the selloff. go bottom first. i'd like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money." i'm jim cramer. see you tomorrow! good evening, everyone, i'm larry kudlow. this is "the kudlow report." well, it sure sounded pick president obama was signaling today at his press conference that only a hike in the top bush tax rates will keep us off the fiscal cliff. by the way, that signal cost stocks 185 points on the dow. and because those tax hikes not only threaten future economic growth, they also include big penalties on capital gains, dividends and other forms of investment. plus, get this. the president wants a $1.6

trillion tax hike over the next decade. itself, a horrific number and begs the question, what is the government going to do with all our money? and have you seen this video? in response to weeks of rocket attacks, israel gets their man with this missile attack on the military leader of hamas. now, israel is launching a full-scale ground attack on the hamas terrorists which are backed by iran, of course. by the way, this is all happening while we have no cia director here at home. first up today, in his first news conference since being re-elected, president obama, with rhetoric sometimes reminiscent of his tax-the-rich campaign mantra, he appeared to dig in his heels on extending tax cuts for the wealthiest americans. take a listen. >> there is a package to be shaped. and i'm confident that parties -- folks of good will in both parties can make that

happen, but what i'm not going to do is to extend bush tax cuts for the wealthiest 2% that we can't afford and according to economists, will have the least positive impact on our economy. >> all right. i don't know about you, but to me, that sounds like a fairly staunch and unwavering position. and yet, the president did insist he's staying open to new ideas. take a listen to this one. >> i am open to new ideas, if the republican counterparts or some democrats have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn't getting hit, reduces our deficit, encourages growth, i'm not going to just slam the door in their face. i want to hear -- i want to hear ideas from everybody. >> all right. now, that second one -- that second one was pretty good, if you ask me.

and again, i'm trying to be optimistic about tax reform rather than higher tax rates that will damage economic incentives. but does this really sound like somebody who's ready to make a deal? that's a big question. here now is cnbc contributor keith bicycoykin, and david web radio talk show host and co-founder of tea party 365. steve, did the president sound like he was ready to do business with speaker john boehner today or not? >> no. this was no olive branch, larry. i was quite disappointed with that speech and press conference. and you noted that the stock market really collapsed as president obama was speaking because he seems not just today but the event that he had on friday, the two statements that he's made, he's been pretty emphatic that he wants those tax rates to go up, come hell or high water. that is going to lead to a mexican standoff with the

republicans if he sticks with that position. i'd like to make one other point about that press conference, larry. i listened to the whole 45 minutes to 60-minute press conference, and not once that i could hear in that speech did he talk about the most important thing, which is cutting government spending. why don't we get the government spending down and then talk about raising taxes? >> you know, if you google up spending and obama, you know what you get? nothing. blank pages. you get nothing. >> in fact, larry, he said he wants his $100 billion stimulus, he wants more spending when he's talking -- trying to talk about lowering the deficit. >> i'm going to come back to that. keith boykin, i'll tell you this. the stock market has nosedived since the election. and it nosedived again today as it heard the president try to walk through either the fiscal cliff or higher tax rates or higher tax rates on investment or a recessionary threat. this is not good, keith. you can't say that this is good. the president's going to have to do something to change this. >> is this the same stock market, larry, that was at 6600

in march. 2009 but doubled to 13,000 under the obama administration? >> well, it was until he got re-elected. >> yeah. >> people think he's turning against them. >> i remember hearing the same argument from you in march of 2009 when the stock market was at its low, and you said that the obama administration policies were going to kill the stock market. and instead, it doubled. so people invested and made a ton of money. the reality, larry, is that elections have consequences. the election is over. the republicans lost. it's time to get over it and move on. that means we have to come together and create some sort of compromise. but it doesn't mean the republicans get their way and they don't move it all to the left. there has to be some movement to the center on both sides. the president's already indicated that in terms of spending cuts, which he said repeatedly. and what the democrats -- >> i never heard spending cuts. i never heard anything about spending cuts. he never heard -- >> he may not have said it today but there were references. >> like i said, you google -- >> the president said over and over that he's willing to have some spending cuts.

>> all right, keith. if you google obama and spending cuts, you're going to come up with a blank page. that's all i'll say. david webb, let me come back to you. one of the scary things about this besides the absence of spending cuts was the article on the front page of "the wall street journal" saying team obama wants a $1.6 trillion tax increase, more than twice what they negotiated with john boehner unsuccessfully over a year ago. are you willing to give the government $1.6 trillion of private money, and if you did, what in the hell would they do with it? that's the part i don't get. what would they do with all that money? >> not only that, but let me ask america this. where do you have the money to give to the government? if you want to tax the wealthy, then you tax money that goes to investment in businesses, in venture capital, investments that the wealthy take for the middle class. this government and this administration had a choice to

make after the election. do you run center, play a clinton move or do you run hard left? we are seeing the obama that i predicted is going to run hard left. he wants to tax the wealthy. by the way, how do you compromise by first telling someone that you need to come to my position, then give me something else and maybe i'll compromise with you? barack obama is not interested in compromise. keith, you just contradicted yourselves. >> mitch mcconnell has been the guy out there saying it, and all republicans are not willing to have any new tax increases. >> that's not true. there's a difference between raising revenues and raising taxes. >> no, i said tax increases, though. tell me, am i wrong about that, steve? >> no, you are wrong. >> when did he say differently? >> look, i interviewed him this week. he said it many times. he said it on the senate floor. we're willing to compromise on raising taxes. that's something that a lot of republicans aren't real happy with, but he said look, i'm willing to put revenues on the table. but what he's saying, keith,

let's be very clear. >> you're saying revenue. i'm saying tax increases. >> right. >> the bush tax rates -- no, i'm talking about bush tax rates. they expire on december 31st contin. >> that's what republicans won't agree to. the answer is no, we're not going to let those rates go up because it's going to do significant damage to the economy. >> like it did during the clinton administration when they created 20 million jobs. >> you're only growing at 2%. you don't have much elbow room. david webb, i don't know, sometimes i think it's a pox on all their houses because david, why should republicans sign on to a cap on tax deductions when they're not getting lower tax rates on the other side? in other words, david, why should the gop say to obama, all right, we didn't want $1.6 trillion of revenues, but we'll give you another $800 billion of revenues. >> that's a lot. >> that's a lot of money, david webb. do you think that's money well spent? do you think the gop should

compromise on that? what's that all about? >> no, i don't think they should. i think what they should do, larry, instead of getting into the argument that keith wants to have, let's look at the policy. how do we raise revenues to the government without changing -- we have tax reform, you mentioned it, we need tax reform. we have got to change some of the things within the tax code. we've got to free up corporations so they can make money. then we can talk about getting rid of subsidies. this government is looking to simply take money in and tell us that they know how to spend it better than we do. you saw the market reaction after election day, down 300-plus. you see the market going down. that's because even though we're the last best hope basically against europe or greece or anybody else, we're getting investment in those top 30 on the dow. but we're not seeing the real movers, the nasdaq and the other markets. >> keith boykin, i'm going to give you the last word. it just looks to me -- keith, i've been very kind to your man since re-election because i

hoped they could make a deal that would not raise marginal tax rates. but after today's press conference, i don't hear entitlements, i don't hear spending restraint and i hear higher marginal tax rates to punish rich people and those who are successful. that's a loser, keith. >> i don't think he's trying to punish anybody, larry. think think there will be a plan that's comprehensive, but his top priority he said today is jobs and growth. that's something i think you would believe in. >> i do believe in that. >> except i didn't hear "growth" in today at all. >> tell me what economic theory -- >> something happened eight days ago. we had an election. >> i know that. >> 120 million people voted. >> tell me this, keith. >> move on. >> one at a time. >> theory says you're going to grow an economy with a $1.6 trillion tax increase. >> you said that about bill clinton in 1993. not a single republican voted for his tax increase, and we had 23 million new jobs. >> it doesn't keep up with population growth. >> i'll tell you this.

>> we are not growing our way out of this, and obama doesn't want to grow. >> regarding the clinton tax hike of '93, first of all, the economy didn't do so great after that tax hike. it was later when he cut the capital gains tax. >> that's not true, larry. look at the numbers, larry. that's not true. >> we cut spending, keith. >> but the fact is, george papa bush gave clinton a really strong 4% economy. right now you've got a whole different situation. >> wait a minute. so you can talk about the senior bush but you can't talk about the younger bush and what he gave president obama? is this not hypocrisy? >> papa bush gave him a better economy. i've got to get out of here. >> it's after the election, you lost, larry. get over it. do you think someone earning $250,000 a year is rich? please tweet us @thekudlowreport. we'll read them later in the show. guess what? nancy pelosi is staying. wow! in congress. as the minority leader of the

house democrats. holy cow. surrounded by women democrats at the house, nancy pelosi told reporters today they were looking into the future. more women, more minorities in the incoming house. more than ever before with her decision. the democratic leadership is not going to change in the new house of representatives in january. and all i'll say is my condolences to her longtime deputy, steny hoyer. anyway, stocks dropped sharply on president obama's press conference today. the dow closed down almost 700 points since the election itself. keith boykin notwithstanding. we'll look at the growing number of investor pessimists. this is not good. later, markets also have their eye on a big escalation in mideast hostility. hamas declaring war on israel. this while we have no cia director. and don't forget, free market capitalism is the best path to prosperity. i don't know why we have to raise $800 billion in revenues. makes no sense to me.

cut spending. i'm kudlow. we'll be right back. if congress does not intervene to avoid the fiscal cliff, almost 90% of americans would receive a tax hike with an average increase of almost $3,500 per household. two years ago, the people of bp made a commitment to the gulf. bp has paid over twenty-three billion dollars to help those affected and to cover cleanup costs. today, the beaches and gulf are open, and many areas are reporting

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it is latest investors business daily poll which is an accurate one shows economic optimism has plunged 10% in november, way into pessimistic territory. a lot of it apparently on the news of president obama's win. overall, his re-election seems to be damaging confidence at least in the stock market. now, take a look at this chart. with fears of falling off the fiscal cliff, higher taxes, a double-dip recession, obamacare, the dow is off about 700 points since election day. this all could change. i recognize that. but so far, it doesn't look good. let's talk to "forbes" magazine's executive editor, michael osaiah. even today on the press conference, obama didn't say i'm going to destroy the stock market, but he didn't really reach out, didn't really say we can make a deal without damaging. stocks fell 185 points. stocks are down 7% since re-election. how do you read that?

>> i read it as when he comes out and says now he wants twice the revenue from taxes than he originally said, going up to $1.6 trillion, what he's really saying is my main goal is redistribute wealth. i never heard the word "growing economy." when you look at the taxes he wants to put in place with obamacare and top marginal rates, both the capital gains taxes and dividends are going to be significantly higher than even the clinton years. that's damaging. >> one of the things about this election is checks and balances. in other words, the house is still in republican hands. and boehner, speaker john boehner, spoke today and said, wait, just cool your jets. we've got a lot of negotiating to do. they're not going to let that happen. but the stock market may be telling us that the house in checkmate will wind up with a recession from the fiscal cliff. in other words, no deal making means bad recession. is that a scenario -- is that what the market's telling us? >> i think you're dead on. if you look at what's happened,

real incomes have fallen much more during the recovery than they did during the preceding recession. 4.8% down versus 2.7% down. unemployment is higher now than when the president first took office. what's made people feel good is a rising stock market. they felt wealthier. now with all these big tax increases coming on on capital gains and dividends, people don't feel that anymore. the significance of this poll, larry, is it's the first poll taken after the election. and the rhetoric has been very strong, also from harry reid. remember, when it looked like romney might win, he said there's going to be in reaching across the aisle. that's what harry reid said. >> i assumed all along that congress, in its wisdom, cannot be so stupid as to let all the tax cuts expire on december 31st. they cannot be so stupid. it's just not possible, republicans and democrats. but i think what you're seeing now and what you saw today is an expected fight between boehner and obama and that all the tax cuts may expire at the end of

the year where we will go into a double-dip recession. i don't believe it, but i'm worried about it. and the stock market doesn't lie. >> and not only that, larry, but also companies have actually been coming out the past couple of weeks saying they're going to lay off people. not just medical device companies like striker which have said that, but an auto parts maker like dana holdings, microsoft has come out and said that. you're going to see the stock market forcing some sort of a deal if it keeps falling. the unemployment number rising could also force a deal. >> i like that, though. in some bizarre sense, if stocks sold off 1,000 points, let's say in the next week or two, all right, sell off 1,000 points, they'd have stock market vigilantes. and they would basically be saying get together and do a deal that won't harm the economy. democrats, republicans, white house. it may take a stock market plunge like that. you're already off close to, what, 700 points, 6%. >> right. >> in other words, it's not out

of the question that the stock market would actually do that and really concentrate the mind of these dopes in washington. >> wasn't it bob ruben who said during the clinton years -- or james carville -- the same thing. look what happened, clinton cut the rate and you had a huge rally in stocks and bonds. the stork market may do the same thing here. >> if you want to root for a bullish stock market, maybe in the short term, let's get a deal going and then do tax reform and entitlement reform. meantime, i think stocks are warping these guys you're going to put us on the precipice of a recession, and that's bad for earnings and stocks. >> the fed has done the same thing. they've come out in recent weeks and said instead of just buying $45 billion of bonds every month, we may have to double that and extend it out further. >> richard fisher of the dallas fed told me last night they don't do that. actually, that's not fair. he said in his opinion they shouldn't do that. we don't know, you might right.

mike of "forbes," thank you very much. this is truly the video of the day. the israelis get their man. the military head of hamas taken down with a missile strike and the fighting isn't over. what's it mean for our security and even our markets? all while we don't have a cia director. we're going to ask a mideast expert in our next half hour. now, wait a minute, take a look at this rare diamond. 76 carats. almost lost this story. 76 carats sold at auction in geneva last night for $21.5 million. the arch duke joseph diamond. it's flawless, colorless diamond which brought bidders in, and it's got a history belonging to a dynasty. how about that? up next, the former cia director, david petraeus, put state secrets in peril. the president said there's no evidence, but senior senators accuse obama of a possible

benghazi cover-up. we'll get right to that also. this president and this administration has either been guilty of colossal incompetence or engaged in a cover-up, neither of which are acceptable to the american people. we have this fiscal cliff staring us in the face. >> i don't think this country can tolerate another driving close to the precipice dynamic. >> most i know don't want to work with the government. >> don't even get close to the fiscal cliff. >> in rising above, we've got to find a way to move forward. >> i have confidence the fiscal cliff will be dealt with. >> what i'll tell the president is we're here to help. >> we have another pin that you could give to president obama. >> for your rise above pin, go to cnbc.com.

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so they can inspire our students. let's solve this. in his news conference today, the president was peppered with questions ons petraeus scandal and the benghazi investigation and what u.n. ambassador susan rice knew when she went on the talk shows five days after the attack on the consulate.

eamon javers joins us with that part of the story. >> it was president barack obama's first opportunity to talk about the david petraeus sex scandal that has rocked washington over the past several days with new details emerging seemingly every single day. but the president today told reporters that the damage from this scandal so far, anyway, has been relatively limited. >> i have no evidence at this point from what i've seen that classified information was disclosed that in any way would have had a negative impact on our national security. obviously, there's an ongoing investigation. i don't want to comment on the specifics of the investigation. >> and the president got a little bit heated today when he was talking about u.n. ambassador susan rice. he said that senators on the republican side who want to go after susan rice, they ought to come after president obama instead. >> for them to go after the u.n.

ambassador who had nothing to do with benghazi and was simply making a presentation based on intelligence that she had received and besmirch her reputation is outrageous. >> and larry, the expectation is now that general petraeus himself will testify behind closed doors up on capitol hill tomorrow about what he knows about the benghazi situation and what u.s. responses were in realtime to that situation. he has testified on the hill before, but this will be the first chance for lawmakers to talk to him since the sex scandal erupted. and obviously that's one that people are going to be watching very closely. but it will be behind closed doors. so we will not see him on camera tomorrow, larry. >> no, but it will leak out. the leaks will be great fun. eamon, i just want to ask you one thing. the president got all heated up about susan rice. but susan rice sold a story with the video and the spontaneous

demonstration. that was subsequently proven not credible. in fact, it was proven not credible even before she started selling it. and mr. obama still has not dealt with that part of the story. how did she get that story? why did she sell it? and why did he sell it when he knew it wasn't credible? >> well, what the president did today, larry, was he linked himself politically welch with susan race. he hitched his wagon to hers in a political sense, and the president saying, look, if you're going to go after her, you're going after me. so the two of them are sort of in this situation together, larry. >> all right. many thanks. cnbc's eamon javers. the key to future republican success is a new message that reaches out for minority support. remember, economic freedom and opportunity is for everyone, all groups. texas senator-elect ted cruz, the first hispanic senator from texas, is about to join us. [ male announcer ] at scottrade,

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, after weeks of rocket attacks, israel responds with this targeted air strike, killing a hamas military leader. hamas now vows to, quote, go to the gates of hell. the question we ask is could the mideast tinderbox explode, all

the while, by the way, we don't even have a cia director here in the u.s. and president obama chalks up yet another record. a whopping $120 billion deficit for the month of october. that's 22% higher than a year ago. and oh, my gosh, are we headed for a fifth straight trillion-dollar deficit? former cbo director douglas holtz ekan to break down the numbers for us. returning after a seven-week recess, with republicans licking their wounds from last week's selection, joining us tonight is a superstar winner from texas, that being senator-elect ted cruz. he, by the way, will become the first hispanic senator from texas, and he's also the new vice chair of the national republican senatorial committee. senator cruz has a nice feel to it. that's the terminology i'm going to use. i want to ask you about president obama's news conference. i don't know if you saw it or not. it kind of sounded to a lot of people like top tax rates, the bush tax rates must go up in

order to avoid the fiscal cliff. did you hear any compromise? did you hear any olive branches? >> well, i think the language the president is using remains confrontational. he seems obsessed with raising taxes. and i think if he continues on that line, we are headed to yet more gridlock. i mean, we're at the edge of a fiscal cliff. and i think the most important thing, larry, is that we enact policies that will improve economic growth. economic growth for the last four years has been stagnant at 1.5%. we've got to get jobs back, entrepreneurs back, and any policies that hurt growth i think are a bad idea. >> you know, one of the things, before we move on, big story in "the wall street journal" today. obama wants -- if i get this right -- a $1.6 trillion tax increase over the next ten years. $1.6 trillion. that's twice as much as the negotiated deal a year ago with john boehner. you think that's pro-growth?

how does that stack up? >> look, i think unfortunately the president has taken this election as a mandate to go further down the road we're on. in four years, we've seen higher and higher spending, debt, taxes and regulations. and it hadn't worked. 23 million people are out of a job. and there is a proven path to turning this country around. over and over again, if you want growth, it's not complicated. >> all right. >> you reduce spending taxes, regulation and you have a sound dollar. >> ooh, i love that, especially that sound dollar part. music to my ears. thank you, sir. let me move on, though. the big "new yorker" magazine story basically about you, and it talks about how immigrants, demographic changes, immigrants are turning red states into blue states. and they're suggesting that texas may go from a blue state to a red state. now, whether or not that is the case, what i want to ask you is this. after getting crushed by hispanics and asians in this last race, doesn't the republican party have to change its tune and its policies,

particularly regarding hispanics and latinos? >> well, i think the republican party needs to do a much better job making the argument. margaret thatcher famously said, first you win the argument, then you win the election. and i think this last election we did not do a good job making the argument about pro-growth policies and that the obama policies aren't working. if you look at hispanic polling, over and over the hispanic community tells you their top priority is exactly the same as every other american's. it's jobs and the economy. do you know, larry, there are 2.3 million hispanic small business owners in this country, roughly one in ten hispanic households is a small business owner. and yet republicans did a lousy job making the case that the obama policies are killing small business and destroying jobs. we've got to do a better job. >> look, i worked for president reagan, jack kemp was a mentor of mine. george w. bush did very well, former governor of texas, obviously, former president

bush. i mean, the gop, it needs an inclusive message. it needs a welcoming message, it seems to me. it needs to stop even hinting that we're going to deport 12 million or 15 million people. we heard all that in the last election, and it was a killer for the republican party. >> there is no doubt that our rhetoric hurts us. i think most americans agree in broad outlines on immigration that we, number one, need to get serious about securing our borders and stopping illegal immigration. but number two, we should remain a nation that welcomes and that celebrates legal immigrants. ronald reagan famously called legal immigrants americans by choice. and we need to celebrate that story of those who risk everything seeking freedom because that's what makes our country strong. >> don't we have to make policy changes, too? it isn't just for politics. i believe immigrants come here to work, not just for welfare. i happen to believe they smart

small business. i think you mentioned that. they're good entrepreneurial people that help grow our economy. but we need to give them worker permits, bring them out of the shadows, give them a path to citizenship. leaders like yourself, an an american-cuban-hispanic. you've got to get out there and make this case, you and marco rube yoe a rubio, go back and make the case to the hispanic community. >> larry, i think we should remain and welcome and embrace legal immigrants. at the same time, we've got to continue to respect rule of law and not adopt policies that are unfair for the millions of people who have been waiting years and sometimes decades to come into this country legally. rule of law matters. and i think that is true even in the hispanic community. >> i don't mean to interrupt you. i just have to challenge you on that. look, yeah, they have been waiting a long time. i've heard that argument a million times, okay? i get it on my radio show all the time. you know what? to me that's the problem with the state department or the naturalization service because

it takes them so long to process these things. you've got this -- i don't know what the number, 11, 12 million people. we should put them on the path to citizenship. they come here to work. let's be hospitable. as reagan said, let's welcome them. i'm not looking for bureaucratic excuses. i think we should just go ahead and do it. >> look, i think our priority in the hispanic community should be making the case that the key to economic prosperity, the key to the american dream is an economy that's growing, an economy that has small businesses that are prospering, that allows entrepreneurs to create businesses. we didn't do that. on this last election, over 50% of the voters said they thought the economic problems were all george w. bush's fault. and we did a lousy job of making the case that if you want to stop economic growth, you adopt the policies the obama administration is adopting. debt and taxes and regulation. >> i'm with you, but i think, you know, governor rick perry was right.

i think the children of the immigrants, whether they're legal or illegal, should be eligible for the tax credits for the state universities. i thought newt gingrich was right in the primaries when he said if you've lived here 0 years, you should be on the path to citizenship. do you see what i'm saying? these little snapshot moments with unfortunately governor romney talking about self-deportation, the right snapshot moments were booted and hooted down by some of my republican friends, and i think we've got to totally get away from that, and you have the creds to do it. >> there's a lot of disagreement on this issue. my view is simple. we need to stop illegal immigration, and we need to welcome legal immigration. >> many thanks, texas senator-elect ted cruz, great to see you. coming up tomorrow evening, i'm going to be joined by republican senator-elect jeff flake from arizona. he, by the way, is a fierce spending cutter. nobody in this country wants to cut spending, it seems to me. the u.s. is on the path to its

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just in case you missed the breaking news we showed you just a few moments ago, the security council will hold an emergency meeting in a little more than an hour from now to discuss the fighting between israel and hamas. no doubt they'll blast the israelis for attacking hamas leaders in gaza. no meetings were called in the u.n. when hamas rockets started raining on israel earlier this month. we're going to talk more about that in just a few minutes. welcome back, everybody. we asked you to do something, earning $250,000 a rich, whether you think it's rich or not, $250,000. so here's a few tweets that came back. tom says, my household income is 260,000 bucks. my wife and i drive used cars, three kids in college. that will be $300,000 in loans. chris cameron thinks it definitely depends on location. blanket statements like this one just don't work in an advanced economy. and dorothy tweets, not for a

small business owner who has employees and other operating costs to maintain. i think the moral of the story is yeah, it depends where you live, but $250,000 does not necessarily make you rich by any means. anyway, many thanks to everyone who tweeted. now, the u.s. government kicked the 2013 budget year off with a whopping $120 billion monthly deficit. that's 22% higher than october 2011. it's an eye-opening indicator that the nation is on a path to its fifth straight trillion-plus deficit year. oh, my gosh. here now is former cbo director and president of the american action forum, douglas holtz-eakin. i know it's one month, but you've got to admit, the numbers are coming in lousy. i mean, revenues have been rising, but spending is rising faster. >> well, i think you're right to point out that, you know, these things change from month to month. depends on things like whether we're sending out tax refunds. one month isn't everything. but i think the concern has to

be that the revenue rise may not condition if the economy doesn't prosper. we've seen some real weakness late in the second half of 2012. i'm deeply concerned about the outlook going forward. and without growth, we don't solve any of knees problemthese. the second problem is the spending really is going higher than revenues every year -- >> look at the 12-month change. >> yeah. >> i'm a former budget official and so forth, but spending growth, 23%, october. 16% growth in revenues is pretty darn good. but even with that 23% growth in spending is not good. that's the whole bloody problem. all right. >> that is the problem. >> let's come back to this. >> as you know, it's the big problem. >> i didn't hear the president today -- we can debate till we're blue in the face and we did it at the start of the show whether he might compromise on a cap on revenues or he's going to insist on raising the top margins. that game's probably not going

to be over until midnight december 31st, but i didn't hear him talk about spending cuts. and i did see the democrats put out a press release saying they did want to put stimulus into the bill. and i heard republicans say that there's no way that the so-called sequester is going to go through. why is it, doug, that everybody is talking about tax hikes, revenue hikes and no one wants to talk about the real problem which is the federal government spends too bloody much? why is that? >> i don't know. i did see the president today. he always talks about having a balanced plan. what is the plan? we never see the plan. i'm waiting to see that. you and i have had this conversation before. i've been in this town for, you know, over a decade now. they love to talk about taxes. taxes up, taxes down, taxes sideways. no one talks about spending. and the threshold decision you make is to spend the money. once you do, you'll have to pay for it one way or another. we've never had a serious discussion on spending. >> right. that's what i want. a long time ago, doug, i was

associate director of the office of management and budget. ronald reagan was the president. and david stockman, before he turned tail, was the budget director. but you know what? we had a ton of spending cuts. a ton of spending cuts. and i have the scars here on my back to show. >> i know. >> and people just go crazy. you've had the same experience. what i'm saying to you is this. before anybody talks about a dollar of new tax revenue, why haven't we exhausted every dollar of spending cuts? that's what -- before we even get to the revenue, why don't we go through spending? and i'm not -- yes, entitlement reform, but also there's a lot of inefficient and duplicative and whole agencies we don't need. before you talk about revenues, one nickel of rev few, why don't we have the conversation on spending? >> i don't know, larry. it's a tremendous frustration. we've seen this for a long, long time, both parties. we really do need a thorough scrub. and they've done it before. they come up with lots of

program cancellations. and they never get through congress. we certainly need entitlement reform because there's no way regardless of what we do that the economy will grow fast enough and revenues will grow fast enough to cover the projected growth in entitlements. this is not complicated. you have to look squarely on the spending side. you need deep entitlement reforms. you need very, very carefully thought-out discretionary reforms. and that's the big problem. we're not having that conversation. >> you know, a big problem is when the president runs a big story on the front page of "the wall street journal" saying they want $1.6 trillion, $1.6 trillion of new tax revenues in the next ten years. i don't see $1.6 trillion in spending cuts. i didn't see 3-1, 4-1, 5-1. i didn't see anything. all i see is a witch hunt to get private sector revenues and transfer them to the public government, which will make it

even more inefficient. this drives me crazy. and i don't see the republicans screaming this. >> you're hiding your irritation well. >> a few guys like tom coburn, he's terrific, and jeff flake just got voted into the senate. doug, i don't hear it from either party. i'm going to be bipartisan here. >> remember, even if they got the $1.6 trillion, that wouldn't be close to the $4 trillion needed to barely stabilize the debt and wouldn't really solve the problem. that's another reminder that you can't tax your way out of this problem. you absolutely do have to have the spending conversation. >> well put. doug holtz-eakin, thanks ever so much. there's an old saying it's an ill-willed wind. that's how we talked about sandy until we heard about john turner. he runs natural catastrophe solutions. he was on the shore when he bought a scratch-off lottery ticket and won $100,000. turner's giving some to his

church, saving some more and investing the rest in his business. you know what? it's nice to have a positive story like this every once in a while. all right. many thanks again to our budget expert, doug holtz-eakin. hamas declares war on israel. israel ground force is now on high alert and ready to act, if necessary. all this while america's top intelligence agencies appear to be in disarray. we're going to try to get a handle on this nasty middle eastern story up next on "kudlow."

so is israel going to wipe out hamas, and what is iran going to do? this after an air strike kills a high-ranking hamas leader today. the mideast tinderbox seems like it's about to explode once again. let's talk, here now is our great friend, barclays senior geopolitical strategist, helema croft, former cia economic analyst. israel is going whole hog now against hamas on the ground. and i'm going to bet that israel is going to do very well, but you tell me. >> i think it's going to be like 2008 all over again. it's deja vu from four years ago. hamas did a series of attacks. israel had a ferocious response. the big question is will this remain confined to gaza, or does it spread to the broader middle east? and you mentioned iran. and all eyes will be on iran, they'll be on hezbollah to see if this becomes a multifront operation. >> can i just get one little quick tour, syria. >> yes. >> if i understand, that's

mostly hezbollah operating in syria. is hamas in syria? >> well, this is a great question because in the case of syria, this has caused a rift between hamas and iran and hezbollah. you have the iranian government backing assad, you have hezbollah backing assad, and you have hamas basically lined up with the opposition. so in many respects, syria has drived a wedge between iran and its former client. >> all right. now, let me go back to israel. iran basically owns hamas, is that fair? >> well, iran has provided financial support. >> they're the financier. i mean, hezbollah, too, but let's stay with hamas for the moment. iran is the banker. >> iran has been a banker. other countries have been as well. they've gotten money from countries like saudi arabia as well. in the case of hezbollah, that is the very, very close partnership. i mean, hezbollah really grew out of the iranian revolution. it is the export of the iranian revolution. so that is the very symbiotic relationship. hamas, it's a little more murky, the degree of, you know, support there.

>> all right. but israel ascending iran a signal. i know, hamas has rained all these rockets down on israeli land, the west bank and so forth. israel, now they're going to go in whole hog, they are good, they have a great military machine. they're sending iran a signal, are they not? i mean, this is some extent about the west bank, some extent about gaza. it's really in large extent about iranian nukes. that's what i want to ask you. >> i think they're sending everybody a signal. i think they're sending the iranians a signal, they're sending hamas a signal, they're sending hezbollah a signal, and frankly, they're sending the syrian government a signal as well because we did have some mortars from syria land in israel. and you had the israelis respond. so i think the israelis are sending a whole host of regional actors that they are serious about the deterrence capabilities. >> how long will they keep this up? let me see, "operation pillar of defense." how long will the israelis keep it up? >> it's a question of when does hamas sue for peace.

we think about 2008. it was an operation that went on for, you know, about a month. the international community, as it went on, tried to weigh in on the israelis and hamas. >> won't they just take out all the leadership? we didn't really report this. the hamas commander was killed, but his son was also killed. and so the thought that i had is, i mean, israel knows this, they may have targeted this, aren't they just going to try to wipe out all the hamas leadership, just wipe them out? >> they basically issued a warning that they should all expose themselves. do i think this is going to be the end of hamas? probably not. will it set them back significantly like 2008? probably. but again, israel has -- the whole neighborhood is in a, you know, chaotic situation right now. >> right there. chaotic situation. united states doesn't seem to be a player in that neighborhood. whether this is the result of benghazi or a million other factors, with the four people killed in benghazi and now this

whole disarray in our national intelligence services, the u.s. doesn't look like a major player. we look like small ball, and that bothers me a lot. >> i think in the case of libya, we thought libya was done. we had won that war. we didn't want to deal with some of the unpleasant truths of libya that it was a weak government with tons of armed militias. in the case of syria, we don't know what to do because we have a syrian opposition that up till now, there's been a lot of disunity, concerns about extremist elements in the opposition ranks. we don't know how we want to handle the situation. >> france is giving some money to the dissidents in syria? >> yes, and they've recognized the syrian opposition. they may potentially arm the syrian opposition. but really, i think you need the united states and nato to really turn the tide there. >> and if we're in disarray, if our intelligence services are in disarray, how the heck are we going to do that? >> again, i think not having a man at the top there certainly is a blow, but the koran littic capabilities remain impact. the operational capabilities remain intact. >> decision-making is still possible. >> yes, absolutely. >> i've got to get out of here.

you're terrific. helima croft, so knowledgeable about the whole story. that's it for this evening. thanks for watching, as always. sorry i ranted on about budget cuts, folks, but i have been through that whole omb process when i worked for reagan. and you need to start talking about spending cuts first before even mentioning the revenue "r" word. i'm kudlow. we'll be back tomorrow. bob, these projections... they're... optimistic. productivity up, costs down, time to market reduced... those are good things. upstairs, they will see fantasy. not fantasy... logistics. ups came in, analyzed our supply chain, inventory systems... ups? ups. not fantasy? who would have thought? i did. we did, bob. we did.

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